A joint report by the Federal Reserve, Office of Thrift Supervision and Office of the Comptroller of the Currency found significant irregularities in the foreclosure activities of ten of the nation’s largest mortgage lenders, and ordered those lenders to “remediate all financial injury to borrowers caused by any errors, misrepresentations, or other deficiencies.”

Under consent orders agreed to by the lenders and the federal agencies noted above, the lenders – which includes Citibank, Bank of America, JPMorganCase and Wells Fargo – must audit foreclosures conducted in 2009 and 2010 within the next 45 days, and compensate injured homeowners.

The amount of compensation due each damaged homeowner is not stated – presumably compensation will be paid on a case by case basis.

Finally, the lenders involved have agreed to create and submit policies and procedures designed to “strengthen coordination of communications with borrowers” and “establish robust controls and oversight over the activities of third-party vendors (mortgage servicers).”

What this means in practical terms to homeowners who lost their houses is unclear as the consent orders attached to the Federal Reserve press release is woefully devoid of details. What is appropriate compensation to a family who lost its home to foreclosure when the lender’s claimed delinquency was improperly calculated? Can aggrieved former homeowners claim damages for emotional distress, for moving expenses, for loss of personal property?

In Georgia, where I practice, lenders can finalize a non-judicial foreclosure in as little as 37 days, and the number of foreclosures in populous counties has seriously damaged the state’s economy. It will be interesting to see what percentage of these foreclosures was tainted and what damages arise from this improper activity. It will also be interesting to see if we will see private causes of action by foreclosed homeowners against banks that pursued improper foreclosure.

Jonathan Ginsberg, Esq.

I represent individuals in Chapter 7 and Chapter 13 cases filed in the Northern District of Georgia, which includes Atlanta, Newnan, Gainesville and Rome. I publish several informative web sites, including www.atlanta-bankruptcy-attorney.com and an Atlanta bankruptcy blog, www.thebklawyer.com/thebkblog. Please mention Bankruptcy Law Network when you call.